When you create a folder inside the mods folder and try to place mods inside, after the game launches, these mods don't run. My opinion is that subfolders would be very useful when it comes to organization. For example, you would be able to separate a modpack's mods from user installed mods or even 2 or more modpacks which are installed in the same instance.

This is deliberate since there are quite a few false assumptions around subfolder semantics. You can add the jvm arg -Dfabric.addMods=mods to get the recursive behavior.

Duplicate of FabricMC/fabric-loader#81